Build a Strong Credit History

Brought to you by

The New York University

Federal Credit Union

CreditAbility

Seminar Objectives

Learn:

Who needs to build good credit, and why

Significance of credit report and score

How to establish credit if you don’t have any

How to rebuild a good credit history

Tips for using credit wisely

Pitfalls that cost you plenty

Your rights and responsibilities

New York University Federal Credit Union 2

CreditAbility

Why build good credit?

Improves your:

Image in eyes of lenders

Ability to get credit Loans, apartment, insurance, credit cards, job

Chances of getting lower interest rates onloans and other forms of credit

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CreditAbility

What’s in a credit report?

Identifying information(name, SSN, date of birth, address)

Employment history

Creditors and payment history

Bankruptcies, judgments, liens, lawsuits

Inquiries you initiated(loan and credit applications, but not credit card solicitations)

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Who can look at your

credit report?

Lenders

Landlords

Potential employers

Insurance companies

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How to order your credit report

Annualcreditreport.com (FACT Act)

Mail request letter

Call 877-322-8228

Or, order through “Big 3” credit bureaus:

Equifax 800-685-1111

Experian 888-397-3742

TransUnion 800-888-42138

CreditAbility

If your credit report

has errors …

The law entitles you to correct mistakes:

Write to credit bureau

Bureau has 30 days to investigate, notify you of

results, and delete inaccurate information

Disagree? Write dispute statement for your file

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CreditAbility

What’s a credit score?

Number that represents creditworthiness The higher the number, the better

Changes over time, depending on payment history

Answers the question, “How likely are you to repay the loan?”

Range:

FICO® – 300 to 850

VantageScore: 501 to 990

Order your score from “Big 3” or myfico.com 10

CreditAbility

FICO Expansion™ Score

For people who lack traditional credit history

Based on: Deposit account records, payday loan repayment,

purchases made on payment plans, and other nontraditional data

Who does it help? Recently divorced or widowed

Immigrants

Young adults who are just starting to handle finances

Those who prefer to pay for services with cash 12

Components of FICO

credit score

Payment history (35% of score)Do you pay bills on time?

Amounts owed to creditors (30%)Do you owe a lot of money to a lot of people?

Length of credit history (15%)How established is your credit history?

New credit (10%)Are you increasing your debt obligations?

Types of credit currently in use (10%)Do you have a “healthy mix”?

15%

10% 35%

30%

10%

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CreditAbility

Tips to build a

strong credit score

Pay all bills on time

Keep credit utilization ratio < 25% of available credit

Don’t close all old accounts

Don’t open a flurry of new accounts

Don’t co-sign if other person has bad credit

Pay your library fines

Click to view video 13

CreditAbility

How to rebuild a

good credit history

Order credit report; correct errors

Pay all bills on time

Pay down debt (consider consolidation loan)

Establish emergency fund as backup

Apply for small line of credit; pay on time

Apply for secured credit card

Get automated bill-pay and direct deposit

Get help from CU or local CCCS16

CreditAbility

Tips for using credit wisely

Charge small amounts; pay on time

Pay in full, or more than minimum

Avoid minimum payment trap

Don’t max out cards

Avoid late and over-the-limit fees

Avoid cash advances

Don’t open flurry of new accounts 17

CreditAbility

Warning signs you have

too much debt

Only make minimum payments

At or near credit limit on cards

Don’t know how much you owe

Use cash advances to pay other bills

Denied credit, or denied credit purchase

Get calls from collection agencies

Lie to spouse or family about spending

More of total income going toward debts18

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Beware the pitfalls

Credit repair clinics

Rent-to-own

Payday loans

Pawn shops

High-interest debt consolidations(Continued)

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More pitfalls …

Debt settlement

Temptation from credit offers

To get off most solicitationlists … Call 888-5opt-out;Visit optoutprescreen.com

ID theft, phishing, vishing, smishing,and pharming

Home equity scams

Bankruptcy “sting” on credit report

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Your rights

and responsibilities

Get credit reports (per FACT Act)

Ask “why” if you’re refused credit

Contact creditors to work out

repayment plan

Report violations of Fair Debt

Collections Practices Act

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What debt collectors cannot do

Use threats or violence

Use obscene or profane language

Publish list of consumers who refuse to pay debts

Repeatedly use the phone to annoy someone

Use false statements or give false information

Use a false name

Send what looks like government/official documents

Contact you by postcard

Deposit post-dated check prematurely Threaten to take your property (unless it’s legal)

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CreditAbility

Case Study:

You make the call

Top priorities

Credit-building strategies

Future benefits from good credit

Pitfalls to avoid

Resources available

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CreditAbility

Checklist: Are you ready?

I have the basics in place:

budget, tracking system, emergency fund.

I plan to pay all bills on time.

I plan to get my credit report and correct errors.

I plan to take steps to increase my credit score.

I plan to keep my utilization ratio below 25%.

I plan to pay down debt.

I understand the potential pitfalls. 24

CreditAbility

Resources

Credit Union National Association

www.creditunion.coop

(Has calculators, budget work

sheets, and credit and debt

resources)

Equifax 800-685-1111

Equifax.com

Experian 888-397-3742

Experian.com

Fair Isaac Corporation

Myfico.com

TransUnion 800-888-4213

Transunion.com

Consumer Credit Counseling Service

Nfcc.org or 800-388-2227

Federal Trade Commission

FTC.gov

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CreditAbility

Remember … your credit union can

help you with all your financial challenges.